August Global Economic Insights

Similar to retirement behavior, COVID-19 reduces the share of household spending on apparel and restaurants.

September 4, 2020 — Temporary workplace closures have played a key role in slowing the spread of COVID-19, and saving lives around the world. Working from home (WFH) has also transformed many people’s work habits and productivity, as well as their spending. Similar to retirement, WFH reduces spending in work-related categories such as apparel and restaurants. However, rather than shifting this displaced spending to other categories, teleworkers are largely saving it. As teleworkers are usually in professions that come with higher incomes, affluent households are not leading the recovery as they have previously.

Key Takeaways

  • COVID-19’s impact on consumer spending, similar to retirement, affects apparel and restaurants disproportionately
  • One out of four workers globally could be working from home
  • Large, wealthier areas are contributing less to the 2020 recovery

2020: The year of global early retirement?

Due to the impact of COVID-19, spending in retail and food service has dropped due to increased temporary workforce closures, which similar consumer spending habits can be seen with retirement. Though, unlike retirement, COVID-19 has impacted work-related spending on a much larger scale. around the world could be done remotely. Globally, as many as 1.1 billion workers (one out of four) could be working from home. Jobs that can be done remotely often come with higher salaries, which has a greater impact on spending.

Working from home has a greater impact on affluent spending

Data from the U.S indicates that as lockdowns have been lifted, continuing WFH arrangements have impacted consumer credit and debit card spending in two distinct ways. First, recoveries in overall card spending growth were weaker in U.S. areas where a greater share of workers could telework. Second, a key driver of this outcome is the strong relationship between spending by high-income households and their ability to work from home, as opposed to lower- to middle-income households where the relationship is more tenuous.

Displaced spending most likely is being saved

The recovery in transaction growth by high-spending cardholders—those in the top quartile of spending in 2019—appears to have stalled during the summer of 2020. In contrast, low- to medium-spending cardholders have begun to close the gap in growth that emerged following the lockdowns. Rising bank balances and savings rates in Europe and North America suggest that this reduced spending is largely being saved.

Loss of work-day sales adds hurdle to urban recoveries

Mandated closures, as well as fear of infection, anxious customers, and loss of tourism-related revenues, have all placed unprecedented stress on urban shops, restaurants, and cafes. While not necessarily the most significant factor, the loss of working-related spending as employees shelter at home could be a more enduring challenge. Working from home lowers spending, especially in work-related categories, and can lead to increased job losses that dampen the recovery. However, forcing workers to return to the office amid an ongoing outbreak will not necessarily lead to a full recovery in spending either.

Similar to retirement behavior, COVID-19 reduces the share of household spending on apparel and restaurants
(change as a share of total retail sales and food services, less autos and gasoline)

A bar chart comparing the impact of employed to retired households against the impact of COVID-19. See Image description for more details.
A bar chart comparing the impact of employed to retired households against the impact of COVID-19 from Jan-Feb 2020 to mid-May through July 2020 demonstrating the similar impact COVID-19 had on reduction in the share of household spending. Among Austria, Germany, Greece, SUnited Kingdom, Sweden and Portugal reduction in spending ranging from -8.89% (UK) to -3.57% (Sweden).

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